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MARKET COMMENT
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Computer games must rank as the worst sector in the stock market. A handful of company updates this morning highlighted just how lousy the industry is for the ordinary investor. The shares of leading computer game retailer Game Group (LSE: GMG) crashed 50% following news of weak December sales. Meanwhile, news of production delays sent game developers Kuju (LSE: KUJ) and Warthog (LSE: WHOG) diving over 20%. It's all a far cry from January this year. Buoyed by impressive sales of the PlayStation 2 console and the imminent launch of Nintendo's GameCube and Microsoft's (Nasdaq: MSFT) X-box, Peter Lewis, chairman of Game, stated "a golden era had begun". And although the new platforms and an abundance of new titles underpinned sales during the year, the inherent problem of computer game retailing -- competition -- has remained. Unfortunately for Game, selling computer games isn't rocket science and disappointing December sales were exacerbated by the "unexpectedly high level of promotional activity" elsewhere. Maybe the postponement of certain games led to the downbeat revenue performance. Earlier this year, Eidos (LSE: EID) decided to reschedule its next Lara Croft and Championship Manager games to February 2003. Today, game developers Kuju and Warthog admitted that delays in signing various contracts with publishers would create profit shortfalls. By owning little, if any, of the all-important character/film rights and content, it's clear the developers have few strings to pull in this particular industry. Running on a technological development treadmill and involving a steady stream of new characters and gaming ideas, the computer game sector has an overwhelmingly faddish nature. Although lucky punters may enjoy short-term riches, the industry is a no-go area for long-term shareholders. To reiterate comments made last year, investors will generally get more enjoyment from buying a game this Christmas, rather than buying the shares of the retailer or developer.